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Saudi Arabia says to launch new bourse improvements on Sunday

Tadawul announces changes to the methodology for determining opening and closing prices

A Saudi investor monitors the stock exchange at the Saudi Stock Exchange, or Tadawul, in the capital Riyadh. (FAYEZ NURELDINE/AFP/Getty Images)

By Sam Bridge

Tue 22 May 2018 01:59 PM

Tadawul, the Saudi Stock Exchange, on Tuesday announced that previously disclosed improvements to its opening and closing price mechanism will be implemented on May 27.

Changes to the methodology for determining opening and closing prices apply to both the main market and the Nomu - Parallel Market, a statement said.

The enhancements include moving from a volume weighted average price (VWAP) to an auction method for determining closing prices.

The previous VWAP methodology for determining closing prices has been replaced by a 10-minute auction after the end of continuous trading. During this, investors determine the price of securities through participating in the auction by placing bid and ask orders.

“These enhancements to price mechanisms further align Tadawul with international best practices and the processes used by other major markets,” said Khalid Abdullah Al Hussan, CEO of Tadawul.

“The result is expected to be greater price efficiency, increased liquidity, reduced market volatility and enhanced security for both investors and intermediaries, and thus creating a more attractive investment climate for domestic and international investors.”

Opening prices will continue to be determined by auction but market orders shall be displayed unpriced at the top of the order book during the auction period, and a single index opening value will be published after all order books have uncrossed, the statement said.

It added that both the market open and market close times will be randomized within 30 seconds after official open and close times to further enhance investor protection and market soundness.

The planned changes to the opening and closing price mechanism were first announced by Tadawul in January as part of a series of significant measures to improve market access and efficiency, enhance liquidity, bolster investor security, mitigate risk and further align market practices with global best practices.